Medical IPOs Still Cursed

Initial public offerings of medical companies came at a furious pace during the first half of the year, outnumbering IPOs in 10 other business categories.

It's likely that insiders at many of these medical firms were furious, too. Three-fourths of the companies went public at prices below what they and their investment bankers had been expecting.

Discounted offerings have been common among biotech and drug debuts over the years, but 2006 has been an especially big disappointment, says the IPO-tracking firm Renaissance Capital.

During the first six months of this year, 16 of 21 medical IPOs went public below their original suggested offering price, according to the firm's Web site, www.IPOhome.com. Four IPOs entered the market at a premium to their original price, and one matched the projected price. Since midyear, there's been one more medical IPO, and it also was discounted.

By comparison, eight of 16 medical IPOs went public at discounts during the first half of 2005. In 2004, Renaissance Capital says 17 of 31 medical IPOs were below the price that had been sought.

By Aug. 22, a whopping 78% of medical IPOs came out below their hoped-for price. Among all other IPOs, the rate was 26%.

Renaissance Capital calculates discounts by comparing the final offering price against the midpoint of the initial price range suggested by investment bankers. For example, if an IPO's initial range is $11 to $13 and the offering price is $6, the discount is 50%.